Sell My Home Fast: Should I Sell My House and Carry the Contract?

In slow markets, when homes just don't seem to move as quickly as we'd like them to, offering seller financing may be the key to getting a home sold. With the sluggish real estate market of the last few years, seller financing has been dramatically increasing in popularity, but is it a smart move for you?

If you just can't bear to let your home go for a fraction of what you paid for it, or you really need to sell quickly, then it may be a great option for you. Offering to carry the contract makes it easier for interested buyers who simply can't get a home loan in today's tough lending environment. Owner financing could help you avoid the nasty consequences of a foreclosure or allow you to trade up and take advantage of a great deal on a better home while prices are low, without juggling two mortgage payments.

Offering any form of seller financing can instantly make your home more attractive and stand out in the sea of properties on the market. It can also allow you to set a far higher price than you could get if you sold it to a cash buyer today. Just make sure you are aware of all your options and how badly it could turn out if things go wrong.

How Dangerous is It?

People have been selling their homes like this for decades, and real estate investors have used the process to make millions, so what it there to worry about?

There are three main threats to those who are considering offering some type of creative financing to prospective buyers.

Your Home Just got Demolished.
Until your contract or seller-held mortgage is paid off, any damage to the property could devalue it further, leaving you with a pile of rubble you can never sell. The last thing you want is someone smashing up the place or a hoarder getting your home condemned!

You Just Gave Away Your Home.
Depending on how you put your documents together, and your state laws, you could be giving up "equitable rights" to your property or creating a shared ownership arrangement. If your buyer defaults, this is going to make it even more of a mess to evict him or her. Get ready to take a number and step to the back of the line behind the banks waiting two years to foreclose on their deadbeats.

No, Those Aren't Pandora Bracelets the Nice Man in Uniform is Bringing You.
No, the sheriff didn't just get a part-time job as a jewelry delivery guy. If you are underwater on your mortgage, and you can't keep up on payments, selling and carrying the contract may be difficult. Obviously, you can't sell the home for less than you owe without your lender's approval, and if the incoming rent or mortgage payments aren't enough to cover your home loan, you could find yourself in big trouble. If your new resident gets a foreclosure notice, you can bet they will be contacting an attorney, the local news, and demanding a warrant put out for your arrest for defrauding them out of their money.

If this is you, get a loan modification or ask your lender about a short sale.

How do I Sell My House and Carry the Contract Safely?

Be extremely wary of signing any document that shady guy with the beat up truck and "We Buy Houses for Cash" magnet sign tries to shove in front of you.

There are a number of ways to offer seller financing, including:

Land contracts
Trust deeds
Seller held private first or second mortgages
Lease options
Rent-to-own

Each has its own pros and cons. What is right for you really depends on your local laws and current situation. All of these choices essentially allow you to demand a higher price tag than the current market would allow and can provide you income as well as a big cash payday later. However, seriously consider consulting an attorney for help drafting the agreement before signing away the deed to your home.

Tip: You may have an assumable mortgage, which a new buyer can simply take over, relieving you from the debt and accelerating the transaction while making your home far more attractive. VA loans closed before March 1, 1988 are typically assumable (lender approval is required for loans closed after that date), so check your loan paperwork carefully.

Know Someone Who Badly Needs to Sell His Home?

Finally, whether or not this is a good move for you, if you have any friends or family members wondering if they should sell their house and carry the contract, suggest that they take the time to vet any potential buyers carefully before entering into a contract, and of course seek the advice of an attorney.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

Can I Keep My House if I go Bankrupt?

Bankruptcy is never an enjoyable process. And in some cases, yes, you will not be able to stay in your house. But not in all of them, say experts. Sometimes, filing bankruptcy could be just the ticket for keeping your home.

Exempt vs. Non-Exempt Assets

Bankruptcy is either the liquidation or reorganization of a person's or business's assets in order to pay the claims of creditors. But not everything you own gets treated alike in bankruptcy courts. Federal law exempts certain kinds of assets from seizure to satisfy creditors, including 401(k) plans, pensions, a limited amount of home equity, a limited amount of life insurance, and the like. However, each state has the option to accept the federal limits, or adopt their own. Each state, therefore, has different rules on how much of your home equity is protected from the reach of creditors in a bankruptcy, according to Corey Vandenberg, a bankruptcy attorney in Provo, Utah.

Why Going Bankrupt can Help You Keep Your Home

If you are drowning in debt, and your home is only one of several outstanding balances, and you want to keep your home, filing for bankruptcy may actually help you. Once you file, the court orders what is known as an automatic stay, meaning all collection activities must cease, pending a hearing before a bankruptcy trustee in a federal court. This means most of your payments could be suspended for a while – which could give you the breathing space you need to save some money to get current on your mortgage.

How Badly do You Want It?

First, consider your overall financial situation. Why did you get pushed so far into a corner that you needed to consider bankruptcy in the first place? In some cases, the root causes of a bankruptcy have little to do with the home. If your monthly outlay for shelter – including mortgage payments, property taxes and utilities – is well within your budget, or is not significantly more than you would pay anyway if you gave up the home and went back to renting, then a tactical bankruptcy may make decent sense.

On the other hand, if you simply have too much house for your income, or if your home will shortly need repairs that are beyond anything you can afford – even after you declare bankruptcy and have other debts discharged, you may not want to try to keep the home. It may make better sense to take the foreclosure (or a short sale), and rent for a time while you get a fresh start.

Furthermore, you may want to let the house go if you are simply hopelessly underwater on the home. If you are making $40,000 per year and you owe $200,000 on a home that's now worth $120,000, it doesn't make much sense to commit the after-tax income of over three years of your life just to come back even. Especially in non-recourse states, where lenders have no claim on borrowers' personal assets in the event that a foreclosure sale does not cover the outstanding mortgage balance. You may be better off letting the house go, saving the $80,000, renting for a while, and starting over by eventually buying another home at a more current market price. If your home has no equity, you can keep it in Chapter 7 bankruptcy. The lender still holds the security interest, although the note is wiped out.

Do I Qualify?

Although bankruptcy hearings occur under the purview of the federal court system, states are generally free to set their own limits on what bankruptcy filers are allowed to keep. In Florida and Texas, for example, you can keep an unlimited amount of home equity in a Chapter 7 proceeding. But you may also have to meet strict limits on your income to qualify for a Chapter 7 full discharge. Other states limit the amount of equity you can retain. For example, in Illinois, you are allowed to keep your home if you have $15,000 or less in equity in your house ($30,000 for married couples.) If you have more than this amount, your creditors could demand that bankruptcy trustees sell the house and pay them off with the proceeds.

If you have at least some income, it is much easier to qualify for a Chapter 13, which is an individual workout. Chapter 13 allows you to restructure your debt and pay at least some of your debt off over about three to five years.

Because state laws vary substantially, it's important to consult with an attorney licensed in your state prior to declaring bankruptcy.

Work out a Deal

Frequently, you can still work out a deal with the lender, depending on the circumstances and whether it makes sense for you to fight to keep the house. With Chapter 7 – a full discharge – filing for bankruptcy only halts the foreclosure process temporarily, until the bankruptcy proceeding has run its course. At the end of the process, the lender will continue with the foreclosure – unless you enter an agreement with the lender, reaffirming the debt. Which you may be in a better position to do, once your other payments – business loans, bank loans, credit cards, even a second mortgage - are wiped out. This provision can help you keep a home, car or other vital asset.

A chapter 13 filing halts the foreclosure permanently – provided you keep making the payments agreed to during your chapter proceedings. If you're worried, don't panic, advises Vandenberg. The bankruptcy court system doesn't want you living in a van down by the river, he says. "There's usually some way to figure out a solution."

In most cases, you can keep the house under the following circumstances:

• You are current on the mortgage.
• Your equity in the home is below the exemption limit allowed by state law.
• You reaffirm the debt.

If you are behind on the mortgage payments, or if you own more equity in the house than your state exempts, Chapter 7 might not allow you to keep the house. In that event, if you want to keep the house, you'll need to file under Chapter 13. This chapter will halt the foreclosure process, restructure your debt, and possibly allow you to make payments on the past-due mortgage amount.

Bear in mind, though, that even this will not permanently forestall foreclosure if you can't make the payments. Bankruptcy doesn't eliminate a lien – your lender still maintains their collateral, and the right to foreclose if you default – even after you declare bankruptcy. If you can't make the arrears payment, plus the ongoing mortgage, you may well have your home foreclosed on, anyway.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

How Your Credit Score Affects Your Mortgage Rate

Credit checks are a necessary part of applying for any loan, but they are especially important during two stages of the loan process: on the day you apply for a mortgage and shortly before closing on the loan. The first credit check is to ensure that you pay your bills on time and have sufficient income to purchase the property. The last credit check before closing is the lender's last assurance that you are, indeed, creditworthy.

Knowing what lenders look for on your credit report and in your FICO® score is important information and can help you prepare to get the best mortgage possible.

Mortgage Lenders

Mortgage lenders take your credit score very seriously. Even though studies show that applicants with high FICO® (Fair Isaac Corporation) scores are more likely to strategically default on a mortgage loan (walk away from it), applicants with low scores are still considered a greater risk by lenders.

Generally, the better your score, the more options you have. You'll be able to buy with a lower down payment, access a wider variety of loan types, and pay fewer points for a lower mortgage interest rate.

Good Score? Lower Mortgage Interest Rate

How much lower will your interest rates be if you have a good credit score? This will vary from individual to individual.

Keep in mind that the FICO® scoring range runs from 300 to 850. Let's say you're applying for a 30-year mortgage and your FICO® score is 760, which is a very good score. Your interest rate may be among the lowest on the market.

Now, let's assume your FICO® score is quite a bit lower: only 620. Suddenly your interest rate is dramatically higher. If your score falls between 500 and 520, you will have much higher interest rates and you'll find fewer lenders willing to work with you.

Borrowers with scores between 300 and 500 are generally not considered creditworthy. If you're interested in learning more about how your score impacts the interest rate on your new mortgage loan, see the chart at MyFico.com.

My Score was Fine. Why Wasn't I Approved?

Even with a sterling FICO® score, you may still be turned down for a mortgage loan. If you are unemployed or have been within the past two years, you may not be approved for a loan. If you don't make enough money to cover the monthly payments, you may be denied a loan. There are any number of reasons a lender may not want to work with you, even with a high FICO® score.

Credit Checks and Life

Your financial history will not only affect your chances of buying a house, but may impact your ability to receive financing for a car, a vacation or for home renovations.

Insurance rates may also be affected by your rating, as poor ratings usually mean higher premiums. Many colleges will consider your financial history before they approve student assistance programs. Even employment may be affected, as many employers require a credit check as a character reference before offering a position.

*** For all the real estate tools and the only Realtor you will ever need, visit TulsaHomeGuru.

Digging for Gold – Investing in Condemned Properties

To some people, broken windows, dilapidated roofs or collapsing porches mean trouble. Other people see dollar signs.

"More than 60 percent of the houses I have bought in Tampa were condemned properties," says Rushing. "I have yet to lose money on those."

How Properties get Condemned

Local authorities condemn buildings for a variety of reasons. In some cases, the government wants to build something in its place and will condemn the property as part of an eminent domain proceeding. Or, it could be a construction, maintenance, or pest issue that makes the structure unusable for its original purpose. In some cases, the repair or maintenance needed is relatively straightforward, but the owner does not always have the resources or know-how to make the repairs or renovations.

In these cases, the owner is almost always a motivated seller. Selling the property may help the owner get at least something for the asset, as opposed to having to let the property sit fallow for months or years. Owners of such homes are frequently willing to sell at substantial discounts. That could mean opportunity for you, the investor.

Finding Condemned Properties

There are a couple of ways to find condemned properties. You can drive around neighborhoods, though it can be hard to tell if a property is condemned just by driving by. For example, some buildings are condemned for nothing more than a non-functioning fire alarm or sprinkler system. If the owner can't make a repair, the structure could look fine from the outside.

You could also enlist your local intelligence network within your favorite neighborhoods. These are neighbors, real estate agents, contractors and other people who can tip you off about a possible purchase opportunity. This is a great way to go, because it gives you an advantage over other bidders for that particular property.

Finally, you could check your local government's list of condemned properties, generally available through its website or by visiting City Hall. In some areas this is less advantageous because the same information is available to all real estate investors at the same time; you may have more bidders on any given property by relying entirely on public records. Nevertheless, opportunities still exist with any of these techniques.

Identify Liens, Encumbrances and Other Issues

Don't go into a deal blind, warns Rushing. Before you sign off on a deal, contact your local government's Department of Condemnation. Rushing asks several questions:

• What, precisely, are the violations that caused the property to be condemned?
• Are there liens on the property?
• Will the government agree to a settlement?

This last factor alone can be tremendous: One of Rushing's deals had a $20,000 lien attached to the title. But when Rushing showed he had the resources to make the needed repairs, the government agreed to waive all but $500 of the encumbrance. All Rushing had to do was show a bank statement as proof of funds, proof that he was authorized to take over the property and the seller agreed to sell the property to him, and a personal letter demonstrating that Rushing knew what the code issues were and had a plan to bring the property back up to snuff.

Financing Condemned Property

Unless you have a track record, or plan on living in the home, finding financing for condemned properties in need of extensive repairs can be a little tough. You may have to settle for a lower loan-to-value ratio. If you have a track record of success, however, and if you can show the lender that after buying the property, you still have the necessary resources to restore the property, you will have better luck.

Meth Labs – Special Considerations

Chrystal methamphetamine is bad news in a lot of different ways. From the point of view of a real estate investor, you need to be extremely careful when investing in these condemned properties, because even after you get the place cleaned up, you must still disclose to prospective buyers that the property was, in fact, used as a meth lab.

Because of the extreme toxicity and persistence in some of the chemicals frequently used in methamphetamine production, the city will generally condemn any property used as a lab pending an extensive clean-up. Depending on the environment, this can be an extensive and pricey HAZMAT project: All absorbent materials will have to be replaced. Not just carpets and furnishings, but also things like drywall, topsoil, ventilation, plumbing and septic systems. You may need to use a qualified HAZMAT contractor. Costs can potentially reach six figures and higher for extensive cleanups. You would need to have a very deep discount indeed to make this a profitable endeavor. For more information on cleaning up a former meth lab, see this publicationby the State of Oklahoma.

Who Should Consider Investing in Condemned Properties?

This isn't for rookies. However, if you have solid experience in the ins and outs of real estate investing, along with skills at estimating repair costs, adequate reserves, and the ability to go without a renter for as long as it takes to make the repairs, buying a condemned property could be a tremendous opportunity.